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By XE Market Analysis April 20, 2017 6:52 am
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    XE Market Analysis: North America - Apr 20, 2017

    The dollar and yen traded mostly softer against other currencies. EUR-USD punched above yesterday's high at 1.0737, with the euro logging a fresh three-week high at 1.0777, extending the run higher from last week's one-month low at 1.0569. Cable lifted back above 1.2800, and USD-CHF decline. USD-JPY, meanwhile, edged slightly high, as did USD-CAD, which rallied to a fresh five-week high as the impact of yesterday's 4%-plus dive in oil prices continued to affect the Canadian dollar. The greenback also lost ground to the Australian dollar, which has corrected some after recent underperformance.

    [EUR, USD]
    EUR-USD rallied over 0.5%, punching above yesterday's high at 1.0737, with the euro logging a fresh three-week high at 1.0747 so far, extending the run higher from last week's one-month low at 1.0569. The losses largely reflect a generally softer dollar, with the buck slipping versus the yen, sterling and other currencies presently, reflecting a descaling in Fed tightening expectations, though the euro itself has found bids following perky Eurozone PPI data. Euro gains have come despite the polarized risks that Sunday's elections in France pose, with the two anti-EU candidates, Le Pen and Melenchon, polling over a combined 40%.

    [USD, JPY]
    USD-JPY has settled around 109.00, though gains appear to have been meeting good selling interest into 109.10-20. Geopolitical risks and less acute Fed tightening expectations have been maintaining some safe haven demand for the yen on the one hand and a sell-on-gains play on the dollar on the other hand. Japan released better than expected trade today, though to little forex market impact, with both export and import growth rising in March figures, with the imports growth rate hitting its highest in three years on the back of the stronger yen (which is presently up over 7% versus the dollar on the year-to-date). USD-JPY resistance is at 109.05-10 and 109.22-25. Support is at 108.50-53.

    [GBP, USD]
    Cable has lifted back above 1.2800 after logging a correction low at 1.2769 yesterday, but remains off Tuesday's six-month high at 1.2908. The pound is consolidating gains from sub-1.2600 levels following the PM's call for a snap election on Tuesday. The thinking in markets is that the Tory Party would likely win a much a bigger majority than present, if polls are to be believed, which would give the Prime Minister much more flexibility in upcoming negotiations with the EU. May will also have three years clear after actual Brexit in 2019 before having to hold a general election, which pundits reckon will also give her much greater leeway in forming a possible transitional trade agreement with the EU. Most analysts are expecting the pound to trade steadier-to-firmer now, which we concur with while advising caution in these febrile times. One risk would be a strong vote for the Scottish National Party on June 8, which would increase the odds for a new independence vote (polls presently suggest there is limited appetite for this, however).

    [USD, CHF]
    EUR-CHF lifted back above 1.0700 on the coattails of EUR-USD, which rallied to three-week highs. This puts in some distance from the February-8 low at 1.0632, which is lowest level traded since last June. Recent declines have reflected broader euro weakness following the ECB's walk back of market speculation that the central bank might have been preparing to switch out of its dovish guidance at its policy meeting next month. There is also political risk into France's presidential elections. EUR-CHF support is at 1.0677, and resistance is at 1.0720-25.

    [USD, CAD]
    USD-CAD has clocked a fresh five-week high at 1.3493, extending the recovery from last week's six-week low at 1.3223 and making today the fourth consecutive up session. Yesterday's nosedive in oil prices has been weighing on the Canadian dollar. USD-CAD support is at 1.3440, while the early March high at 1.3534, which is a near four-month peak, marks an upside waypoint.

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